Lockton survey reveals new challenges for risk managers
As existing P/C captives expand to include employee benefits risks, often under the guidance of risk managers, understanding their concerns and challenges may prove useful for client relationship managers more accustomed to dealing with human resources departments.
Risk managers face a growing confusion of challenges and new demands according to a Lockton survey of risk management professionals. The survey, presented officially at Lockton’s Complex Risk Symposium in mid-June 2017, indicates that risk managers are becoming increasingly involved with senior management and are more likely to be involved in strategic business issues, including M&A activity. All of the respondents to the survey were US-based risk management decision makers and approximately 2/3 of the respondents represented multinational firms.
Findings show that C-suite, and CEOs specifically, are increasingly interested in the balance between the risk retained and risk transferred. Additionally, CFOs are more interested in the appropriateness and efficiency of programs and not only focused on program costs.
Other key findings of the survey include:
- Risk managers are faced with many issues regardless of the size of their departments, including performing risk assessments and building a stronger understanding of the business operations to creating better administrative processes along with departmental procedures.
- CFOs tend to focus on strategic issues and less on tactics.
- Cyber risk is the most prevalent risk that respondents identified that CFOs are interested in exploring. From understanding and quantifying the exposures related to cyber events, assessing the organizational readiness for such events, to the financial resources available to backstop such an event (current insurance program response and available insurance products).
- There is a demand for more strategic advice as brokers’ historical focus of transactional excellence and broad understanding of the insurance marketplace is considered a given as opposed to the centerpiece of a broker’s value proposition.
Regarding risk managers’ workload, Ryan Brown, Senior Vice President and Client Advocate for Lockton Companies said, “Whether it’s claims, contractual liability matters or M&A, risk managers are being asked to do more with less.” Risk managers could become overwhelmed and mired in the day to day tasks of serving their internal constituents; finding enough time to spend on strategic issues is difficult.
The survey results indicate that those risk managers who are able to tackle strategic issues have more say with senior management by way of routine communication, involvement in broader organizational issues, and an integral role in M&A activities.
The role of the broker must evolve to support today’s risk manager by providing “administrative relief and unfettered access to strategic advice as a part of its core service. The days of a broker’s role solely placing coverage and then ‘selling’ strategic advice as an ‘add-on’ is at odds with the needs of a risk manager operating in a resource-scarce environment.”
Risk managers will not be able to address employee benefits without major support from their employee benefits broker and/or consultants. Whereas classical P&C risks can be addressed by risk managers with limited interaction with day-to-day business operations, both cyber risks and employee benefits cannot be tackled without a lot of involvement, cooperation and coordination with IT and HR departments. Such coordination is extremely time-consuming, especially in a global, multi-cultural firm, and time – read headcount – is exactly what risk managers don’t have anymore. This situation may represent a significant opportunity for employee benefits brokers and consultants to provide their clients with the required time and expertise, allowing risk managers to focus on strategy and on the broad picture.
For a summary of survey findings, go to http://complexrisksymposium.com/survey-results/